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Realty trusts pique investor interest despite Covid pandemic

Blackstone and K Raheja-backed Mindspace Business Parks Reit made a robust debut on the stock markets on Friday, listing at a premium of more than 10% over its initial public offering (IPO) price. The strong demand reflects ample liquidity in the stock markets and low interest rates globally, which has forced investors to seek high-yield options.

The IPO, which was priced at ₹275 apiece, was subscribed 13 times. On Friday, shares of Mindspace Reit closed at ₹303.87 on BSE.

Between this IPO and a secondary share sale in Embassy Office Parks Reit, the only other listed Reit in India, in the past 45 days, investors have bet almost $1 billion on prime commercial real estate in India.

The response to the share sales suggests investors are confident that tier-I commercial property owners will see brisk business despite the pandemic.

Sharad Mittal, chief executive at Motilal Oswal Real Estate Fund, said commercial rentals may have slowed but the existing occupancy is expected to remain.

“The listing of the Mindspace Reit at a premium shows a balanced product like Reit is preferred by both institutional and retail investors. Despite the recent weakened sentiment around commercial real estate, a diversified portfolio of grade A assets with strong rental collections as demonstrated by the Mindspace Reit finds favour with retail investors,” he said.

Investor confidence in the properties is also reflected in the strong financial performance of Reits. In the June quarter, Embassy Office Parks Reit signed leases for 526,000 sq. ft, including 200,000 sq. ft of new leases at market rentals, and 325,000 sq. ft of renewals at 20% spread to existing rentals, the Reit operator said while announcing its quarterly earnings on Thursday.

Rating agency Crisil recently said rental collections have remained healthy, over 90%, across office spaces rated by the firm. On the investor side, liquidity and search for yields are factors driving the interest in Reits, said an investment banker who advised the Mindspace IPO.

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